A 5% yield, first time since 2002

The yield on France's ten-year government bonds crossed 5% on the morning of 21 October, a level last seen in 2002. Spanish outlets timed the move at about 11:05 Madrid time, with La Razón reporting a peak of 5.08% and ABC reporting 5.005%. The benchmark pulled back during the session, and around noon ANSA put it at 4.98%, up 5.9 points. ABC notes that yields have been climbing for weeks as the government of President Emmanuel Macron tries to pass a tough 2027 budget through parliament. The two peak readings come from different outlets for the same moment, so the exact high remains uncertain.

The spread with Germany at a 15-year high

The gap between French and German ten-year yields, the market's gauge of perceived credit risk, widened to its highest in well over a decade. Bloomberg reported the spread widening six basis points to 159.4 early in the session. ANSA said it passed 159 points in the morning for the first time in 15 years, and by midday it measured 156.1 points. Il Sole 24 Ore put the spread at 157 points against a previous close of 153, and dated the level as the highest since November 2001. ABC dated its high to November 2011, so the outlets disagree on the comparison point.

Earlier, the gap between the two countries had crossed 1.5 percentage points, peaking at 1.53 shortly after 11:00. Watson described that as a level not seen since January 2012, when it had last closed at 1.48 points.

Weekend riots and the 2027 budget

Watson links the bond moves to violence over the weekend of 17 and 18 October, when protests over purchasing power were followed by looting and riots in several cities. Authorities reported about 2,400 arrests and nearly 1,000 injured police officers and gendarmes. The government's draft 2027 budget plans 43 billion euros of new effort to bring the public deficit down to 5% of GDP, but a compromise looks difficult in a deeply divided parliament. ABC adds that even if the budget is approved, the deficit would still sit at 5% of GDP, far above the EU limit of 3%, with public debt staying near 120% of GDP. UBS Global Wealth Management strategists say the 1.5-point level is associated with the euro zone debt crisis. Kathleen Brooks of XTB says political and social pressure is building as the country tries to write a tough budget for next year.

Borrowing costs across the euro zone

France borrowed at 4.96% on ten-year debt, against 3.43% for Germany, 4.59% for Italy and 4.07% for Spain, according to Watson. La Razón put the German ten-year yield at 3.41% at about the same hour. Watson notes that France is paying more than Italy and Spain, two countries long seen as the euro zone's weakest links. These readings are intraday snapshots taken at different hours, not closing figures.

France4.96%

Germany3.43%

Italy4.59%

Spain4.07%

France

4.96 %

Germany

3.43 %

Italy

4.59 %

Spain

4.07 %

Data from the article text